Look Who's Buying Dollars Now

A big chunk of new central bank reserves are dollars, and one strategist sees implications for the euro.

Jens Nordvig, chief G10 FX strategist at Nomura Securities, sounded an alarm earlier this year about capital flightfrom Europe that he believed was weighing on the euro. Those flows have slowed, Nordvig says - but the euro is hardly out of the woods yet.

The latest TIC data, the monthly report on Treasury international capital, shows significant buying of dollars among major central banks and monetary authorities, Nordvig says.

"Official sector dollar accumulation has been strong relative to more moderate reserve accumulation,"he wrote in a note to clients. "There has been some evidence in this direction" since the last quarter of 2011, Nordvig said. He adding that the trend seemed poised to continue - especially if you deduct the Swiss National Bank's purchases of euros as it tries to keep the Swiss franc in check.

Why should you care? Because if this buying-spree is sustained, demand for dollars will outpace that of euros. That, Nordvig says, would make it very tough "for euro/dollar to bounce meaningfully."